Rapid, smooth and low cost payments: this is the recipe for success used by Dwolla, one of the startups that is revolutionizing the world of money and that has now earned the notable sum of 16.5 million dollars in its third round of financing. Dwolla takes a commission of just 0.25 cents and has already successfully counted 1 billion dollars in transactions.
The success and rapid growth was due to, above all, the multiple applications of the service offered, useful and available to everyone: peer-to-peer money transfers to divide the bill at a dinner among friends, sending an allowance from parent to child, b2b transfers to pay service suppliers, donations, and much more. The goal is ambitious: “To allow anyone who has an Internet connection to transfer their money quickly, securely, and at the lowest cost possible”.
The idea came about in 2008 when the then 18-year-old Ben Milne tried to find a solution to a common problem: the high commissions on credit card payments imposed on retailers in the payment circuit. Costs that weigh on the final user as well. What was obviously most inconvenient were the so-called microtransactions, that is, those with a sum inferior to a specific number (less than 10 euros). As well, credit card payments slow the flow of moneyfor retailers and expose them to fraud (much more so than with a mobile phone payment, for example). It was a closed and rigid system that seemed obligated to pass through banking institutions. Dwolla, on the other hand, created a software that could allow money transactions directly between sender and receiver, concluded in less than one second and in a totally secure manner. FiSync is the first solution used in the United States that can function in real time. This is how Dwolla surpasses the old transaction management system called Automated Clearing House (ACH), because, before the invention of FiSync, ACH needed between 5 and 7 days to process capital transactions. This time lapse was largely due to an outdated system and the number of operations and parts involved in the process.
The software functions in total respect of privacy guaranteeing that it does not share data for any other type of use, it is agnostic in regards to type of payment (p2p, b2b, c2b) and, above all, it is end-to-end without any intermediaries or third parties. This makes it cheaper, with commissions equal to just 0.25 cents, which also makes it more interesting for payment circuits on all sides, from consumer to retailer. The real disruption, therefore, is in the passage from a centralized circuitous bank system to a system that revolves around the consumer and his needs. Notwithstanding this, Dwolla does not pose itself as an enemy of financial institutions, nor an alternative to them. FiSync is, in fact, a system based on the API that are offered by Dwolla free of charge to banks, financial, and commercial institutions so that they can all exploit the benefits of a web-based platform.
The biggest merit that must be given to Ben and his team is that of knowing how to respond in a clear way to a concrete need and know how to seize the enormous opportunity offered by the world of money and its future. Above all, in the U.S., where a total of 1 trillion dollars in credit card payments are processed every year and 98% of economic activities occur without the use of hard cash. Opportunities that become even vaster if the whole world is taken into account. Contrary to the 2.5 billion people who use Internet (about 1 billion of whom own a smartphone), only about half of the world population has a bank account. That means there is a significant segment of the population for whom mobile could become a tool to transfer money in a fast, simple and secure way.
